What The Fat Wallet taught me (#245)
The Fat Wallet Show from Just One Lap
Like many of you, I have listened to every episode of The Fat Wallet Show. I’ve learned so much over the years, but I find it interesting that some lessons keep repeating. This week, Simon and I spend our last episode together reflecting on lessons we keep on learning. Think of this as the TL;DR version of 245 episodes of this incredible show. Here’s what we know for sure: Many people who listen to the show think their biggest financial decision is ahead of them when actually they’ve already made it: being an active participant in your own financial life is the best financial...
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Access bonds explained (#244)
The Fat Wallet Show from Just One Lap
If you’re new to this money business, access bonds will confuse you. Not only do we use the word “bond” to mean “lending money to the government” and “borrowing money from the bank to buy a house”. The access we’re talking about has changed over the years. As Simon Brown explains in this week’s episode, in the bad old days before the 2008 crash, banks used to give you a little additional spending money when you took out a home loan. Those days are long gone, but the idea prevails. These days you can’t access the interest or principal repayments you’ve already made....
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The cost of moving retirement products (#243)
The Fat Wallet Show from Just One Lap
It has always been the philosophy of this show that a good question is more valuable than a good answer. It’s incredible what you can learn from a really good question, both about the topic and about the person asking the question. This week, Frank had an excellent question about moving retirement funds. This question reveals, first and foremost, just how much Frank already knows about the market. It also reveals a thoughtful person who has found a balance between taking calculated risks and doing whatever he can to protect his assets. In this episode, we address issues around the ethics of...
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Passive income (242)
The Fat Wallet Show from Just One Lap
A conversation on our excellent had me wondering why we’ve never dedicated a whole Fat Wallet to finding passive income streams outside of investments. It took about ten minutes for the realisation to dawn on me: true passive income is a myth. We often talk about side-hustles. “Hustle” is the operative word there, because we’re describing a second job. The appeal of working in your free time is the diversification of income streams and the potential to eventually earn your monthly income doing something you enjoy instead of your day job. True passive income means you work at...
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Should I stay or should I go? (#241)
The Fat Wallet Show from Just One Lap
Many people take their first wobbly steps into the financial world because they understand money is meant to do something. What exactly that “something” is, is often left to someone else to figure out. However, once they start learning about the financial environment for themselves they realise there might be products better suited to their needs. Moving a lump sum away from a provider you’ve trusted for a few years is a daunting process. Even if your reasons are sound, it’s not an easy decision to make. In honour of the brand new tax year, we spend this week’s episode helping...
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Farewell Fatties! (#240)
The Fat Wallet Show from Just One Lap
After five rewarding years as host of The Fat Wallet Show, my time with the show is coming to an end. This episode is a short retrospective of our time together, followed, as usual, by your questions. On 30 May 2016 we published the of The Fat Wallet Show. We knew from our personal experience and from our work at Just One Lap that money was such an emotional topic. All so-called financial education came with an assumption that you would already know the jargon and have some basic understanding of how the system worked. Based on the questions we got at Just One Lap, we knew that wasn’t...
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TFSA strategies (#239)
The Fat Wallet Show from Just One Lap
Christmas is the most wonderful time of the year, but tax month is a close second. For buy-and-hold investors like myself, this is the only time of year I get to do anything significant in my portfolio. That’s why I take a moment to reflect on my portfolio every February. My tax-free strategy may seem static from the outside, but it has changed as new products have come into the market and as I’ve matured in my investment philosophy. The market is a highly dynamic environment and even a buy-and-hold strategy requires sharpening every so often. In honour of tax-free savings month, we think...
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Finding the next hot thing (#238)
The Fat Wallet Show from Just One Lap
We are still running our survey. Please take two minutes to . Around the beginning of every year we notice a strange phenomenon. Energised by the holidays and inspired to turn life into an everlasting vacation, investors start searching for the investment Holy Grail. “What is the one, hot thing that will finally liberate me from the shackles of employment?” The opportunity that generates the most excitement changes every year, but the pattern is the same. Newbies and impatient veterans alike flock to alternative assets, penny stocks or underdog listed companies believed to be the...
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Money and travel (#237)
The Fat Wallet Show from Just One Lap
There’s nothing like lockdown to induce a bad case of wanderlust. 11 months into the biggest bummer of many of our lifetimes, it’s wonderful to hear some ordinary good news. Remember weddings? Lady Kablo certainly does. She got married in December. Lockdown is giving her a little time to think about what she’d like for her perfect honeymoon. Many of us striving for financial independence hope to travel once we no longer have to work. Every time I take a trip, be it abroad or local, I’m reminded travel money works differently from ordinary money. While I’m extremely frugal in my...
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Intergenerational wealth (#236)
The Fat Wallet Show from Just One Lap
Time is such an odd ingredient in the realm of wealth creation. When treated with respect, a good amount of time can be your greatest ally. When ignored, however, time can be your biggest risk. In a country with so much historical inequality, the idea of intergenerational wealth seems entirely mythical. However, a small amount of money sprinkled with a great deal of time makes building a nest egg for the next generation seem downright simple. By the same token, sleeping at the wheel creates an opportunity for inflation to eat away at real returns. In this week’s episode, we explore...
info_outlineYou might not be thinking about where your family will be in 2120, but Greg is. This week he shares a mad plan to make a 100-year investment.
Greg
I thought about starting an investment with a 100- year time horizon.
A lot can happen in 100 years. Maybe we don't use money anymore. Maybe earth explodes. Who knows? But if things still kind of resemble the way they are now and there's still a stock market then once off R10,000 invested in equities could be worth around R30m in 100 years (in today's money). So I think it's worth taking the risk.
I'd have to get my offspring onboard when it came to that point and then their offspring, to keep it invested and change the investment vehicle if and when needed. Worst-case scenario, a greedy grandchild decides to cash it all in and blow it on bubbles and a house with a sea view, which is also not a bad outcome.
I started with R10,000 in my EasyEquities USD account and bought the Vanguard S&P500.
Ultimate goal - I'm not sure yet, but hopefully it would get used wisely, to help supplement income for a few families, not get depleted and continue to grow.
Just curious if you have thought about doing this?
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Win of the week: Nokuthula and
Bea
Thank you very much for your thorough answers to my questions. Kristia, I love how you answer questions from the perspective of all - you do not assume that everyone knows all the financial keywords. I appreciate your guidance and the presence of JOL in our lives. Being new to all of this, both yourself and Simon's ongoing presence is a comfort to me and so many others - I am sure.
Simon’s answer to my furniture and storage question was classic and was taken to heart. ' Burn it!' This got my attention since family have said things along the same lines. Both of you also seem to understand life situations, in my case the hold that belongings have and how they really own you. The grim reality is that, like Simon says, these things that we attached so much worth to...end being worth so little - in monetary terms...years later.
Ina
My brother lives in SA and I’m in the UK. He advised me to listen to some of your podcasts - I think they are truly brilliant!
Could you recommend anything similar in the UK that I can listen to in regards to advise as I really need some tips on the UK market?
Get in touch with Garth McKenzie.
Peter
I listened to your podcast which I enjoyed a lot.
Someone asked what to do with a large amount of money- a windfall, obviously keeping tax efficiency in mind. I noticed that buying gold and specifically Krugerrands was not mentioned.
Could you explain why not especially with the current Bull phase of gold.
Sandy
I have a life insurance policy that has age-rated premiums. Looking ahead even just 10 years, these monthly premiums become shocking.
My policy is tied to a dread disease benefit, so maybe that's why. But as I get older, that's when I'll need this benefit, right? Especially with a family history of breast cancer. But how will I afford it? I don't want to pay all this money in and then have to cancel my policy.
Are there alternatives to age-rated premiums, and if so what are they? Could you be insured for a specific amount that doesn't grow each year. But then, what about inflation? Urgh!
Please help. I'm so confused!
Mike
A few years before I retired I became aware that I should take responsibility to inform myself about financial issues. At work in a secure enjoyable technical environment I did not have any exposure to financial issues.
I was unprepared to manage the expected pending inadequate pension which I accepted with-out seeking informed advice from anyone. During that time I was introduced to Red Hot Penny shares material.
I was also fortunate enough to have a small amount of capital to open an equities broker account with Imara. This is now Momentum Securities who charge me R40 per month even though I do not seek their advice and make all my own trading decisions. Over the years I have gained an interest in investing as basically a buy and hold investor. However I do now have a share portfolio despite my largely ignorant independent cautious DIY approach.
I am a client of Standard Bank dating back to 1990, but I believe the time has come to move my broking account. I have made a feeble attempt to do this before but have failed to complete the exercise.
I find my isolation as a pensioner in the new, to me, digital environment and lack of informed personal interaction is daunting for me such that I have not achieved the move.
I know that with change I would have to work on an unfamiliar platform. Before I take the decision to commit to Standard Bank do you know if I am able to use a Demo trading account? Please could I speak to you about who to contact to get the website details and if there is a tutorial I can use to familiarise myself with the platform.
Ben
Before she even gets going she gets penalised with R20k, not to mention everything else that looks terrible with this option.
Needless to say I put this on hold - I'm careful to meddle but couldn't let this one fly. I will recommend as an alternative a similar split in equity, bonds and cash (the proposed split is appropriate for this portion of her money), but the first two in ETFs.
Here are my two questions:
- The equity ETF portion is easy, but is there also a bond equivalent of the "one ETF to rule them all" for more moderate risk investments that I can consider for the bonds portion in this case? (Bonds in your ETF portfolio.)
- The product is being sold to her with the benefit that it won't form part of her estate and will be easily transferable and keep going if anything happens. Is there any merit to this? What will happen with her Ashburton 1200 and Bond ETF I buy if something goes wrong that could be avoided with the Glacier option? My first thought is to call BS on this too.
Adam
Is it possible to use the R40 000 CGT allowance each year? By selling shares for a profit just before the tax year end at a profit and then buying them back in the next tax year, would you then recognise the purchase of shares at the new purchase price? Is this a way to minimise future tax costs since you now recognise future profits off of this higher value?
I've seen this being referred to as bed and breakfasting but I'm not sure what regulation is applicable in South Africa and how one would go about it.
Marco
I have a comment or question in regards to your use of acquiring a foreign currency "hedge" against the rand value declining over time. The problem (as I understand from reading around) is that there is a yearly tax "drag" on this method because any unrealised appreciation in foreign currency is taxed as income, as interpreted here: https://www.rsm.global/southafrica/news/tax-implications-foreign-exchange-differences .
Now, I'm unsure if this is entirely applicable to a "buy and hold", as I have used this method in order to do my own taxes as I do some day trading using USD and not ZAR. Perhaps this doesn't apply if you can show you were buying foreign currency as a "capital" gain if you hold onto it for longer than 3 years?